Quality Differentiation and power in the Mexican Coffee Market

Theory and Evidence

Abstract

Mexican coffee industry organization is complex, it has a multitude of producers, processors and wholesaler. That complexity may hinder the ability of the domestic coffee industry which expand its markets at home or abroad. In order to salvage production those groups mix different quality coffee beans together, missing the opportunity to practice price discrimination across different quality standards, If a strict classification is followed, Mexican coffee could receive higher prices and would not have to depend upon volatiles caused by uncertainty in the future world supply of coffee bean, in particular the production behavior of Brazil and Colombia. This study examine the Mexican coffee pricing mechanism, and the current market channel focusing on potential imperfect competition processors. This examination focus on the failure of pricing mechanisms which fail to send the appropriate prices signals with regard to coffee quality.